Ballot initiative would allow public pension cuts

Oct. 15, 2013

Updated Oct. 18, 2013 12:47 p.m.

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In explaining his support for the pension initiative, Santa Ana Mayor, Miguel Pulido, said "We need to consider meaningful reforms to reduce current benefit levels and obligations in the near term in order to maintain basic services." MACKENZIE REISS, ORANGE COUNTY REGISTER

In explaining his support for the pension initiative, Santa Ana Mayor, Miguel Pulido, said "We need to consider meaningful reforms to reduce current benefit levels and obligations in the near term in order to maintain basic services." MACKENZIE REISS, ORANGE COUNTY REGISTER

Out come the big guns for the Hugest! Pension! Battle! Ever!

On Tuesday, a coalition of California mayors – including Santa Ana’s Miguel Pulido (right) and Anaheim’s Tom Tait (below) – filed a proposed constitutional amendment with the state attorney general which would do the unthinkable: allow California governments to lower pension formulas going forward for public workers.

It would not – we repeat, would not – take away benefits public workers have already earned. And it would let each little city and county work out the devilish details for itself – no dictates from on high.

It’s the sort of forward-fix that Democratic Mayor Chuck Reed (of the almost-bankrupt city of San Jose) and the non-partisan Little Hoover Commission have argued is essential if core public services for Joe Citizen, and pensions themselves for public workers, are to survive.

“Many of California’s public employee retirement plans are simply unsustainable and it’s in everyone’s interest to provide the tools to fix the problem now…” Reed said in a prepared statement. “(W)e believe employees would much rather adjust their future expectations than risk seeing their accrued benefits slashed in bankruptcy. We’ve already seen that tragic situation play out in cities like Stockton and Central Falls, RI. Our teachers, police officers, firefighters and other dedicated public servants deserve to know that the pensions they’ve earned will be there when they need it – not just the day they retire, but also when they’re 85 or 90.”

But defenders of the current system are having none of that.

“This extreme proposal, advanced by a career politician and funded by a former Texas-based Enron trader, breaks the promise of a secure retirement made to millions of Californians, many of whom are ineligible for Social Security and have an average pension of $26,000 per year,” said Dave Low, chairman of Californians for Retirement Security, which represents more than 1.5 million current and retired public workers. “It will allow public employers to unilaterally cut the retirement benefits promised to current teachers, firefighters, police officers and school bus drivers — a promise upheld by the Supreme Court...”

The initiative’s backers now need to raise about $2 million to gather enough signatures to get the constitutional amendment onto the ballot next year.

Joe Citizen, prepare for acute verbal whiplash.

THE PROBLEM

In brief: Officials assumed that the booming market of the early 2000s would never end. They gave big hikes in pension benefits to public workers – especially to public safety workers – swallowing promises that it wouldn't cost an extra dime. They quit contributing to pension funds entirely for a while, assuming things would always be rosy.

Then the recession hit, and they rudely awoke from their stupor.

Back in 2005, 1,841 retirees pulled down more than $100,000 a year in pension checks from the giant California Public Employees Retirement System. By the end of 2012, membership in the $100K club had skyrocketed 700 percent, to 14,763, according to data from CalPERS.

And here we are in 2013 with agencies scrambling after reforms for new hires. But the immediate picture is grim: CalPERS – which serves the overwhelming majority of local governments – is officially $80 billion underfunded. A plan just approved to fully fund the system within 30 years will require even more money up front from all the cities, counties and special districts using its services.

Some agencies are now spending one of every five general fund dollars on pension costs, the mayors said.

A MATTER OF SURVIVAL

Taxpayer contributions into California’s public pension systems totaled $17.4 billion in 2011 – five times higher than a decade earlier, according to numbers from the state controller’s office.

“Today, many government employees can retire as early as age 50 and collect a guaranteed pension — which can equal up to 90 percent of their highest annual salary — for the rest of their lives,” Reed and Pulido wrote in a recent op-ed for UT San Diego. “We believe that California’s constitution should be amended to grant state and local governments clear authority to modify pension formulas for an existing employee’s future years of service.

“This would settle the ongoing dispute over the ‘vested rights’ doctrine, which has been used to block any effort to prospectively change the rate at which existing employees accrue benefits in the future. Private-sector pension plans have the flexibility to change benefits going forward, and we believe government leaders should have that option as well.”

In a statement released late Tuesday, CalPERS disputed that.

“The courts have clearly established that California public employees have a vested right to the level of benefits promised to them when they are first employed. This prevents not only a reduction in the benefits that have already been earned, but it also prevents a reduction in the benefits that an employee has been promised for their future service.”

But at least 18 other states can do that, as can private-sector retirement plans. Mayor Reed argues that the California court decisions denying reductions in future pensions are an “extreme interpretation” of the law.

And one might argue that the public is on the mayors’ side: Last year, big pension reform packages passed overwhelmingly in two Democrat-heavy cities, San Jose (with 69.6 percent of the vote) and San Diego (with 66.2 percent of the vote).

Those initiatives are now tied up in court, as this one would surely be.

'THE PLOT'

The Institute for America's Future, a leftie think tank in Washington, D.C., released a report last week outlining a sinister right-wing plot to manufacture “the perception of a public pension crisis in order to both slash modest retiree benefits and preserve expensive corporate subsidies and tax breaks.”

The worst offenders: The Pew Charitable Trusts’ Public Sector Retirement Systems Project, and the Laura and John Arnold Foundation (a brainchild of rich Texans who have spent millions bankrolling pension reform efforts in California and elsewhere), it said.

The report is titled “The Plot Against Pensions: The Pew-Arnold campaign to undermine America’s retirement security" – and leave taxpayers with the bill.” Public pensions face a 30-year shortfall of $1.38 trillion, or $46 billion a year, but officials “rarely ever mention that, as The New York Times reports, ‘states, counties and cities are giving up more than $80 billion each year to companies’ in the form of subsidies and tax expenditures.”

A poll done in February and released a few days ago by Californians for Retirement Security – that’s the coalition of public workers – found that 63 percent of people oppose “Allowing Public Employers to Unilaterally Cut Retirement Benefits for Current Employees.”

Voters polled said they’d prefer to see changes occur at the local level, rather than at the state level, and through negotiations between employers and employees, rather than through the ballot box. If that poll seems to directly contradict what voters just did in San Jose and San Diego, the Californians for Retirement Security aren’t mentioning it.

“It's the underlying premise of the Reed initiative: breaking the promise to teachers, firefighters, police and other employees who made their career choice and changing the rules in the middle of the game,” Steven Maviglio, spokesman for the coalition, said by email.

GOING FORWARD

Earlier efforts at pension reform initiatives faltered after the state issued official titles and summaries – which, supporters charged, were highly damaging. San Jose’s Reed said the mayors tried to take those lessons into account.

“We’ve talked to a lot of mayors – liberal, conservative, Democrats, Republicans – and I believe have correctly identified a solution: modifying the state constitution to make sure that cities have clear authority to make modifications to future years while protecting benefits already earned,” Reed said. “We are not specifying an outcome. We are empowering local and state governments going forward to sit down with their unions to work this out. We’re empowering the unions as well.”

Reed’s “guardedly optimistic” about the initiative’s chances. And other pension warriors are as well.

“I would state that the trend is moving in Mayor Reed’s direction,” said Supervisor John Moorlach by email.

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